Exam 15: International Portfolio Investment

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound.

A zero-coupon French bond promises to pay €100,000 in five years.The current exchange rate is $1.50 = €1.00 and inflation is forecast at 3% in the U.S.and 2% in the euro zone per year for the next five years.The appropriate discount rate for a bond of this risk would be 10% if it paid in dollars.What is the appropriate price of the bond?

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.One year after investment,the stock pays a £1 dividend,and sells for $54 the exchange has changed from €.625 per dollar to €.6875 per dollar,although he sold $17,600 forward at the forward rate of €0.65 per dollar.

In May 1995 when the exchange rate was 80 yen per dollar,Japan Life Insurance Company invested ¥800,000,000 in pure-discount U.S.bonds.The investment was liquidated one year later when the exchange rate was 110 yen per dollar.If the rate of return earned on this investment was 46% in terms of yen,calculate the dollar amount that the bonds were sold at.

The record of investing in U.S.-based stock mutual funds

With regard to the past price performance of U.S.-based closed end country funds,

With regard to the OIP,

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock using 50% margin.One year after investment,the stock pays a £1 dividend,and sells for £54.The interest on the margin loan is 1% per year.The margin loan was denominated in pounds. Spot exchange rates at the start and end of the year are shown in the table.

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

The stock market of country A has an expected return of 8%, and standard deviation of expected return of 5%. The stock market of country B has an expected return of 16% and standard deviation of expected return of 10%. -Find the Global Minimum Variance Portfolio. With a correlation coefficient of negative one we know that the efficient

Assume that you have invested $100,000 in British equities.When purchased,the stock's price and the exchange rate were £50 and £0.50/$1.00 respectively.At selling time,one year after purchase,they were £60 and £0.60/$1.00.If the investor had sold £50,000 forward at the forward exchange rate of £0.55/$1.00,the dollar rate of return would be:

A zero-coupon British bond promises to pay £100,000 in five years.The current exchange rate is $2.00 = £1.00 and inflation is forecast at 3% in the U.S.and 2% in the U.K.per year for the next five years.The appropriate discount rate for a bond of this risk would be 10% if it paid in dollars.What is the appropriate price of the bond?

With regard to the OIP,

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.One year after investment,the stock pays a £1 dividend,and sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound,although he sold £8,800 forward at the forward rate of €1.28 per pound.

The stock market of country A has an expected return of 5%, and standard deviation of expected return of 8%. The stock market of country B has an expected return of 15% and standard deviation of expected return of 10%. -Find the Global Minimum Variance Portfolio. With a correlation coefficient of negative one we know that the efficient

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock on margin with only 40% down and 60% borrowed.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound.The interest on the margin loan is 1% per year.The margin loan is denominated in pounds.

Suppose you are a euro-based investor who just sold Microsoft shares that you had bought six months ago.You had invested €10,000 to buy Microsoft shares for $120 per share; the exchange rate was $1.55 per euro.You sold the stock for $135 per share and converted the dollar proceeds into euro at the exchange rate of $1.50 per euro.How much of the return is due to the exchange rate movement?

With regard to the OIP,

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.One year after investment,the stock pays a $1 dividend,and sells for $54 the exchange rate has changed from €.625 per dollar to €.6875 per dollar,although he sold $16,000 forward at the forward rate of €.65 per dollar.

Advantages of investing in U.S.-based international mutual funds include